Megaupload, the popular file-sharing site, was shuttered Thursday and its executives indicted by the Justice Department in what the authorities said was “among the largest criminal copyright cases ever brought by the United States.”

Seven individuals connected to the Hong Kong-based site were indicted on a variety of charges, including criminal copyright infringement and conspiracy to commit money laundering. Four of the members of what the authorities called a five-year “racketeering conspiracy” were arrested Thursday in Auckland, New Zealand, the authorities said.

One of those arrested was Kim Schmitz, aka Kim Dotcom, Megaupload’s founder. His attorney, Ira Rothken of California, said neither he nor his 37-year-old client, who resides in Hong Kong and New Zealand, was given the opportunity to surrender. Dotcom was arrested without notice, he said.

“We’re looking into what’s going on,” Rothken said in a telephone interview.

Visitors to the Megaupload site, which gets about 50 million hits daily and claims 4 percent of all internet traffic, were greeted with a message from the Justice Department. ”This domain name associated with the website Megaupload.com has been seized pursuant to an order issued by a U.S. District Court.”

Swizz Beatz, Megaupload’s chief executive, was not implicated in the indictment but is embroiled in a legal spat with Universal Music over a Megaupload promotional video.

The government said the site facilitated copyright infringement of movies “often before their theatrical release, music, television programs, electronic books, and business and entertainment software on a massive scale.” The government said Megaupload’s “estimated harm” to copyright holders was “well in excess of $500 million.”

Unsealed Thursday, the five-count indictment from the Eastern District of Virginia came as the Justice Department said it seized 18 domains in all connected to Megaupload. The agency said it executed more than 20 search warrants in the United States and eight countries, seizing $50 million in assets.

Megaupload, which often charges its 150 million registered members for its file-sharing service, was on the recording and movie industries’ most-hated lists, often being accusing of facilitating wanton infringement of their members’ copyrights. The indictment claims it induced users to upload copyrighted works for others to download, and that it often failed to comply with removal notices from rights holders under the Digital Millennium Copyright Act. But the site routinely removed uploaded child pornography, according to the indictment.

The money laundering charges are connected to allegations Megaupload paid users for uploading infringing content under an “uploader rewards” program.

Others indicted include:

*Finn Batato, 38, a citizen and resident of Germany, chief marketing officer.
*Julius Bencko, 35, a citizen and resident of Slovakia, graphic designer.
*Sven Echternach, 39, a citizen and resident of Germany, head of business development.
*Mathias Ortmann, 40, a citizen of Germany and resident of both Germany and Hong Kong, chief technical officer co-founder and director.
*Andrus Nomm, 32, a citizen of Estonia and resident of both Turkey and Estonia, software programmer.
*Bram van der Kolk, aka Bramos, 29, a Dutch citizen and resident of both the Netherlands and New Zealand, programmer.

The indictment alleges that Dotcom owns 68 percent of Megaupload.com, Megaclick.com, and Megapix.com, and 100 percent of the registered companies behind Megavideo.com, Megaporn.com and Megapay.com. The feds allege that in 2010 alone, Dotcom personally made more than $42 million.

The feds also say that over the last five years, PayPal has transferred more than $110 million in payments from users buying premium accounts that grant access to copyrighted works from “computer servers located around the world.” Non-premium customers could watch no more than 72 minutes of a video at a time, according to the indictment.

The feds also added that a number of those arrested, including Dotcom, uploaded and downloaded infringing material to Megaupload.

According to the indictment, the defendants generated revenue through subscriptions and online advertising. Subscriptions cost as “little as a few dollars a day” or $260 per lifetime. The indictment claimed the site took in $150 million in subscription fees overall and $25 million in advertising over a five-year period.

“Before any video can be viewed on Megavideo.com, the user must view an advertisement,” the indictment said.

The indictment says Megaupload did not host a search function on its site but instead relied on the sites that Dotcom owned and thousands of third-party “linking” sites pointing to copyrighted content on Megaupload. These third-party sites participated in the “uploader rewards” program and, according to the indictment, were paid “financial incentives” for their “linking” services.

Meantime, in what appears to be retaliation, an apparent DDoS protest by Anonymous, the websites Justice.gov, UniversalMusic.com and RIAA.com were all down Thursday afternoon.

And they were able to do with without SOPA or PIPA and without crippling freedom of speech.

BucEyedPea

01-19-2012, 11:01 PM

Yes they were able to do it without SOPA. But can they seize take property before being given due process?
This is like the drug war. Unless they need it for evidence. I don't know how that works.

They sounded guilty too with millions of dollars in money denied to the owners for use of their creations.

KILLER_CLOWN

01-19-2012, 11:06 PM

Yes they were able to do it without SOPA. But can they seize take property before being given due process?
This is like the drug war. Unless they need it for evidence. I don't know how that works.

They sounded guilty too with millions of dollars in money denied to the owners for use of their creations.

I've downloaded plenty from Megaupload, none of it copyrighted material. Plenty of patches and user created content which was all fair use.

BIG_DADDY

01-19-2012, 11:07 PM

Screw the government, all hail anonymous. I am getting to the point that I don't want to spend any money that I think will wind up in the hands of the RIAA or the MPAA.

BucEyedPea

01-19-2012, 11:07 PM

I've downloaded plenty from Megaupload, none of it copyrighted material. Plenty of patches and user created content which was all fair use.

Their attorneys say the case is without merit. Guess will see. I heard they had TV shows, movies, games and software being used.

KILLER_CLOWN

01-19-2012, 11:10 PM

Screw the government, all hail anonymous. I am getting to the point that I don't want to spend any money that I think will wind up in the hands of the RIAA or the MPAA.

Unfortunately Anonymous chose the wrong time to do this as at it falls right into the hands of those screaming for SOPA.

ClevelandBronco

01-19-2012, 11:19 PM

Our government has committed an act of theft in an effort to stop theft.

BIG_DADDY

01-19-2012, 11:27 PM

Unfortunately Anonymous chose the wrong time to do this as at it falls right into the hands of those screaming for SOPA.

Bring it on. It's worth watching the fallout of the politicians that push it through.

Brock

01-19-2012, 11:42 PM

Throwing Hollywood a bone.

BIG_DADDY

01-19-2012, 11:57 PM

Throwing Hollywood a bone.

Trying to but I don't think it will work. The backlash would be significant. The mainstream media isn't even talking about it like it's a big deal but I have heard a lot of people irked by the whole thing over the last 2 days. These politicians are already running scared with historically low ratings. I think the risk>reward scenario is weighted heavily on the side of dropping this like a hot potato.

BigChiefFan

01-20-2012, 12:11 AM

Our government has committed an act of theft in an effort to stop theft.Thank you, brother. I'm always happy to see someone with a grasp on reality.

BucEyedPea

01-20-2012, 12:24 AM

Trying to but I don't think it will work. The backlash would be significant. The mainstream media isn't even talking about it like it's a big deal but I have heard a lot of people irked by the whole thing over the last 2 days. These politicians are already running scared with historically low ratings. I think the risk>reward scenario is weighted heavily on the side of dropping this like a hot potato.

They're also being pressured and lobbied intensely by Hollywood and the music industry.

KILLER_CLOWN

01-20-2012, 12:47 AM

Our government has committed an act of theft in an effort to stop theft.

May as well repost my thought on this, since people keep reposting the topic...

On the surface the Megaupload case looks odd and un-prosecutable, but after reading some of the indictment, it appears that the company CEO and employees were complete and total morons. They should have kept a lot of their conversations offline. Their e-mails are going to hang them.

Obviously a business can claim wide-eyed innocence and say "piracy? What are you talking about, we faithfully comply with takedown notices. You can't make it illegal to have a 'cyberlocker' site, lots of our traffic is legit, etc"

In this case, the feds are going to use their own e-mails to prove intent, to prove that when they started megaupload, they seeded their business with illegal content hoping to get people to start using it, to prove that they sometimes refused to comply with takedown requests even though they knew it was copywrited until it became profitable for them to start complying, and from there they can seize and shut down Megaupload probably all legally.

I've got no sympathy for those idiots. More than anything, they were guilty of being stupid. This site will be replaced by other cyberlockers who are not dumb enough to knowingly break the law.

KILLER_CLOWN

01-20-2012, 09:14 AM

May as well repost my thought on this, since people keep reposting the topic...

On the surface the Megaupload case looks odd and un-prosecutable, but after reading some of the indictment, it appears that the company CEO and employees were complete and total morons. They should have kept a lot of their conversations offline. Their e-mails are going to hang them.

Obviously a business can claim wide-eyed innocence and say "piracy? What are you talking about, we faithfully comply with takedown notices. You can't make it illegal to have a 'cyberlocker' site, lots of our traffic is legit, etc"

In this case, the feds are going to use their own e-mails to prove intent, to prove that they sometimes refused to comply with takedown requests even though they knew it was copywrited until it became profitable for them to start complying, and from there they can seize and shut down Megaupload probably all legally.

I've got no sympathy for those idiots. More than anything, they were guilty of being stupid.

Guilty of being stupid isn't necessarily punishable though, look at the entirety of the human race. On average that would land most of us on deathrow.

alnorth

01-20-2012, 09:19 AM

Guilty of being stupid isn't necessarily punishable though, look at the entirety of the human race. On average that would land most of us on deathrow.

I edited in more info shortly after posting, but to add: when they started megaupload, they seeded their site with copywrited content hoping to attract people into using their cyberlocker. Their own e-mails are going to destroy megaupload.

Which is not going to be a big deal in the end. A lot of cyberlocker sites who are not run by morons and who will not knowingly break the law will replace them.

RubberSponge

01-20-2012, 09:25 AM

Guilty of being stupid isn't necessarily punishable though, look at the entirety of the human race. On average that would land most of us on deathrow.

They will just say ignorance is not a good defense. Then go about their quest to find the next internet Al Capone.

BIG_DADDY

01-20-2012, 09:53 AM

They're also being pressured and lobbied intensely by Hollywood and the music industry.

There is a lot of lobbying on the other side as well having to consider the fallout from their constituents.

WELLINGTON (Reuters) - New Zealand police on Saturday revealed bizarre details of the arrest of the suspected kingpin of an Internet copyright theft case against the James Bond-like backdrop of a country mansion hideaway with electronic locks, a safe room and a pink Cadillac.

German national Kim Dotcom, also known as Kim Schmitz, was one of four men arrested on Friday, a day before his 38th birthday, in an investigation of the Megaupload.com website led by the U.S. Federal Bureau of Investigation.

The group was accused of engaging in a scheme that took more than $500 million away from copyright holders and generated over $175 million in proceeds from subscriptions and advertising.

A police official said dozens of officers, backed by helicopters, forced their way into the mansion, nestled in lush, rolling farmland, after Dotcom refused them entry, a scene more reminiscent of a high-octane spy drama than the usual policeman's lot in rural New Zealand.

"Despite our staff clearly identifying themselves, Mr Dotcom retreated into the house and activated a number of electronic-locking mechanisms," said Detective Inspector Grant Wormald from the Organised and Financial Crime Agency New Zealand.

Officers broke the locks and Dotcom barricaded himself into a safe room which officers had to cut their way through to gain access.

"Once they gained entry into this room, they found Mr Dotcom near a firearm which had the appearance of a shortened shotgun," he said. "It was definitely not as simple as knocking at the front door."

ROLLS-ROYCE PHANTOM

Two firearms were seized and a 55-year-old New Zealand man has since been charged with illegal possession of a pistol. Computers and documents were also retrieved and more than NZ$10 million ($8 million) was seized from financial institutions.

Television footage showed vehicles, including a pink Cadillac and a Rolls-Royce Phantom Drophead Coupe, being removed from the property.

The house where Dotcom was arrested was one of the largest and most expensive in the country, worth around NZ$30 million.

Located in hills northwest of New Zealand's largest city, the mansion is surrounded -- at suitably discreet distances -- by other substantial country homes and luxury lifestyle blocks complete with stables, swimming pools and tennis courts.

Dotcom leased the property after being blocked from buying it last year by the government after failing to meet a "good character" test for migrants, although he was granted residency in 2010.

Dotcom has previous convictions for insider trading and embezzlement from his time in Germany and Thailand, according immigration authorities, leading some opposition politicians to question why he was allowed to settle in the first place.

"New Zealand is under the radar, away from Interpol and a better lifestyle than Eastern Europe," Jeffrey Carr, an Internet security expert founder of Taia Global Inc, said of Dotcom's decision to settle in New Zealand.

"They obviously weren't aware how closely the FBI has been building its international relationships over the past few years."

The FBI said Dotcom personally made $42 million from Megaupload in 2010 alone.

Standing some 6'7" tall and reportedly weighing around 300 pounds (136 kg), Dotcom appeared to revel in his outlaw reputation.

Personalized number plates on some 20 vehicles seized from the site included KIMCOM, HACKER, STONED, GUILTY, MAFIA, GOD and POLICE, according to the indictment.

One video on YouTube shows him racing a Mercedes in the Gumball 3000 road rally and talking about bribing a Moroccan official.

Another clip shows a 2011 New Year's Eve fireworks display over Auckland organized and paid for by Dotcom to celebrate his family being granted residency. The display was reported to have cost $500,000.

WELLINGTON (Reuters) - New Zealand police on Saturday revealed bizarre details of the arrest of the suspected kingpin of an Internet copyright theft case against the James Bond-like backdrop of a country mansion hideaway with electronic locks, a safe room and a pink Cadillac.

German national Kim Dotcom, also known as Kim Schmitz, was one of four men arrested on Friday, a day before his 38th birthday, in an investigation of the Megaupload.com website led by the U.S. Federal Bureau of Investigation.

The group was accused of engaging in a scheme that took more than $500 million away from copyright holders and generated over $175 million in proceeds from subscriptions and advertising.

A police official said dozens of officers, backed by helicopters, forced their way into the mansion, nestled in lush, rolling farmland, after Dotcom refused them entry, a scene more reminiscent of a high-octane spy drama than the usual policeman's lot in rural New Zealand.

"Despite our staff clearly identifying themselves, Mr Dotcom retreated into the house and activated a number of electronic-locking mechanisms," said Detective Inspector Grant Wormald from the Organised and Financial Crime Agency New Zealand.

Officers broke the locks and Dotcom barricaded himself into a safe room which officers had to cut their way through to gain access.

"Once they gained entry into this room, they found Mr Dotcom near a firearm which had the appearance of a shortened shotgun," he said. "It was definitely not as simple as knocking at the front door."

ROLLS-ROYCE PHANTOM

Two firearms were seized and a 55-year-old New Zealand man has since been charged with illegal possession of a pistol. Computers and documents were also retrieved and more than NZ$10 million ($8 million) was seized from financial institutions.

Television footage showed vehicles, including a pink Cadillac and a Rolls-Royce Phantom Drophead Coupe, being removed from the property.

The house where Dotcom was arrested was one of the largest and most expensive in the country, worth around NZ$30 million.

Located in hills northwest of New Zealand's largest city, the mansion is surrounded -- at suitably discreet distances -- by other substantial country homes and luxury lifestyle blocks complete with stables, swimming pools and tennis courts.

Dotcom leased the property after being blocked from buying it last year by the government after failing to meet a "good character" test for migrants, although he was granted residency in 2010.

Dotcom has previous convictions for insider trading and embezzlement from his time in Germany and Thailand, according immigration authorities, leading some opposition politicians to question why he was allowed to settle in the first place.

"New Zealand is under the radar, away from Interpol and a better lifestyle than Eastern Europe," Jeffrey Carr, an Internet security expert founder of Taia Global Inc, said of Dotcom's decision to settle in New Zealand.

"They obviously weren't aware how closely the FBI has been building its international relationships over the past few years."

The FBI said Dotcom personally made $42 million from Megaupload in 2010 alone.

Standing some 6'7" tall and reportedly weighing around 300 pounds (136 kg), Dotcom appeared to revel in his outlaw reputation.

Personalized number plates on some 20 vehicles seized from the site included KIMCOM, HACKER, STONED, GUILTY, MAFIA, GOD and POLICE, according to the indictment.

One video on YouTube shows him racing a Mercedes in the Gumball 3000 road rally and talking about bribing a Moroccan official.

Another clip shows a 2011 New Year's Eve fireworks display over Auckland organized and paid for by Dotcom to celebrate his family being granted residency. The display was reported to have cost $500,000.

In December of 2011, just weeks before the takedown, Digital Music News reported on something new that the creators of #Megaupload were about to unroll. Something that would rock the music industry to its core. (http://goo.gl/A7wUZ)

I present to you... MegaBox. MegaBox was going to be an alternative music store that was entirely cloud-based and offered artists a better money-making opportunity than they would get with any record label.

"UMG knows that we are going to compete with them via our own music venture called Megabox.com, a site that will soon allow artists to sell their creations directly to consumers while allowing artists to keep 90 percent of earnings," MegaUpload founder Kim 'Dotcom' Schmitz told Torrentfreak

Not only did they plan on allowing artists to keep 90% of their earnings on songs that they sold, they wanted to pay them for songs they let users download for free.

"We have a solution called the Megakey that will allow artists to earn income from users who download music for free," Dotcom outlined. "Yes that's right, we will pay artists even for free downloads. The Megakey business model has been tested with over a million users and it works."